When Bitcoin smashed $20k levels yesterday, it was just getting started. The cryptocurrency then proceeded to a new record high of $21,448. It eventually settled down at $21,359.60 as Wednesday trading closed, leaving traders out of breath.
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Welcome to the new normal featuring Bitcoin. After years of operating in the sublevels of financial markets, the most prominent crypto is getting serious attention from mainstream investors and traditionalist markets. Anybody who bought cryptocurrency two months ago saw their investment double in value within the period.
Bitcoin’s latest breach into $20,000 territory came after UK Investment from Ruffer Investment Management said they are holding $744 million worth of bitcoin. Michael Sonnernshein, managing director of Grayscale Investments, said that the 20k level “is a very symbolic threshold to reach at the end of what has been a historic year for bitcoin.” Grayscale Investments manages trust funds that invest in cryptocurrencies such as bitcoin. With the latest upticks in crypto, Grayscale and other like-minded investors saw their assets rise from $2 billion in January to $13 billion.
Other well-known investors and companies started coming out to acknowledge their bitcoin interests. Hedge fund personalities such as Paul Tudor Jones and Stanley Druckenmiller already admitted to holding cryptocurrency. Companies such as Massachusetts Mutual Life Insurance Co., Square, Guggenheim Partners, and MicroStrategy are also in the mix.
‘A Must-Have for Traditional Players’
Rob Paone, the founder of blockchain recruiting firm Proof of Talent, also doubles as host for the YouTube crypto channel “Crypto Bobby.” He noted that “Bitcoin and other cryptocurrencies are becoming a must-have for some of the traditional players. Square has been successfully adding it and other companies have taken note and added it to their platform, most notably PayPal and Robinhood.”
Bitcoin also plays into fears that people are missing out. “The bitcoin narrative about scarce digital gold is growing, especially with the uncertainty around the stimulus environment,” Paone said. “It’s table stakes — and a lot of companies are looking at this like they are missing out if they are not adding it to their portfolio of products.”
Different from 2017
Experts say this latest Bitcoin bull run revolves around the current uncertainty surrounding the economy. Matt Luongo, CEO of Thesis, a crypto venture firm, says that this 2020 run is different from the last time Bitcoin smashed $20k in 2017. That year, Bitcoin broke the $20,000 threshold. But, it crashed back to $3,000 levels after a few months.
Luongo said, “The fundamentals are the same as in 2017, but the opportunities for making bitcoin more expressive are far greater than the last big bull run that got it to $20,000.” He added that “In 2017, we saw a bitcoin bubble. In 2021, I expect we will see another. But, unlike the last, the alternative financial system has grown tremendously. We’re beginning to see real, parallel economic activity outside of trading, commerce, and credit facilities. This growth represents real adoption, and it won’t disappear when the next bubble bursts.”
Bitcoin Has a Finite Supply
The absolute limit to the number of bitcoins is 21 million. While everybody knows limiting Bitcoin supply provides it with anti-inflationary properties, the reason why 21 million is the arbitrary limit remains a mystery. Bitcoin inventor Satoshi Nakamoto did not disclose the reason for choosing that number.
Jason Deane, a Quantum Economics analyst, noted that since bigger firms now look at bitcoin, it “led to an increasingly bullish narrative.” Deane believes with a finite supply, the race is on to secure bitcoin holdings while the supply continually dwindles. “It’s probably not too strong to say this is institutional FOMO (fear of missing out) and those organizations who have been looking to do this now realize they will have to move fast to secure it,” he added.
Hedge Against Other Markets
Unlike the 2017 bubble, the market now better understands bitcoin. Hence, the big players are now taking a serious look into cryptocurrency. At the least, it’s gonna be an inflation hedge against other investments such as stocks and hard currency. UK asset manager Ruffer disclosed that it keeps 2.5% of its $27.4 billion portfolios invested in Bitcoin. “We see this as a small but potent insurance policy against the continuing devaluation of the world’s major currencies. Bitcoin diversifies the company’s (much larger) investments in gold and inflation-linked bonds, and acts as a hedge to some of the monetary and market risks that we see.”
Watch the Yahoo Finance report with guest Travis Kling, Founder and Chief Investment Officer of Ikigai Asset Management as he weighs in on the outlook for Bitcoin and the crypto market:
As Bitcoin smashed 20k levels yesterday, are you ready to invest in it? Do you plan to do so in the next few months? Let us know what you think about Bitcoin or cryptocurrency in general. Leave your thoughts and opinions in the comment section below!